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Insurance
Glossary of Terms... Page 2
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Face Amount The amount of insurance provided by the terms of an insurance
contract, usually found on the first page of the policy. In a life insurance policy,
the death benefit.
Final Expenses Expenses incurred at the time of a person's death. These
include funeral costs, court expenses associated with probating his or her will, current
bills or debt, and taxes. Depending on their circumstances, the survivors may also want to
pay the outstanding balances of mortgage and loans.
First To Die Insurance Insurance policy whose death benefit is paid to the
surviving insured upon the death of one of the insured's. There is no longer a benefit
once the benefit is paid, however, the surviving insured usually has the option of
purchasing a policy of the same amount without providing evidence of insurability.
Fixed Benefit A death benefit, the dollar amount of which does not vary.
Free Look Provision required in most states whereby policy owners have up to
20 days to examine their new policies at no obligation.
Funeral Expenses Expenses incurred for a funeral and burial. These can
include casket, vault, grave plot, headstone and funeral director.
Grace Period Period of time after the due date of a premium during which the
policy remains in force without penalty.
Graded Premium Policy A type of whole life policy designed for people who
want more life coverage than they can currently afford. They pay a lower premium rate that
increases gradually over the first three to five years and then remains constant over the
life of the policy.
Guaranteed Term A form of renewable term insurance that remains in force as
long as the premiums are paid on time. With guaranteed term insurance, the insurance
company cannot terminate the policy during the term.
Guaranteed Insurability (Guaranteed Issue) Arrangement, usually provided by rider,
whereby additional insurance may be purchased at various times without evidence of
insurability.
Incontestable Clause A clause in a policy providing that a policy has been in
effect for a given length of time (two or three years), the insurer shall not be able to
contest the statements contained in the application. In life policies, if an insured lied
as to the condition of his health at the time the policy was taken out, that lie could not
be used to contest payment under the policy if death occurred after the time limit stated
in the incontestable clause.
In Force Insurance on which the premiums are being paid or have been fully
paid.
Insurability All conditions pertaining to individuals that affect their
health, susceptibility to injury and life expectancy; an individual's risk profile.
Insurable Interest Requirement of insurance contracts that loss must be sustained
by the applicant upon the death of another and it must be sufficient to warrant
compensation.
Insurance A formal social device for reducing risk by transferring the risks
of several individual entities to an insurer. The insurer agrees, for a
consideration, to pay for the loss in the amount specified in the contract.
Insurance Policy The printed form which serves as the contract between an
insurer and an insured.
Insured The party who is being insured. In life insurance, it is the person
because of his or her death the insurance company would pay out a death benefit to a
designated beneficiary.
Insurer Party that provides insurance coverage, typically through a contract
of insurance.
Irrevocable Beneficiary A beneficiary that cannot be changed without that
beneficiary's consent.
Increasing Term Insurance Term life insurance in which the death benefit
increases periodically over the policy's term. Usually purchased as a cost of living rider
to a whole life policy.
Lapse Termination of a policy upon the policy owner's failure to pay the
premium within the grace period.
Level Term Insurance Term coverage on which the face value and premiums
remain unchanged from the date the policy comes into force to the date the policy expires.
Life Expectancy The average number of years remaining for a person of a given
age to live as shown on the mortality or annuity table used as a reference.
Life Insurance An agreement that guarantees the payment of a stated amount of
monetary benefits upon the death of the insured.
Limited Pay Policy A type of whole life insurance designed to let the
policyholder pay higher premiums over a specific period such as 10 or 20 years and then
not pay any premiums for the rest of his or her life.
Medical A document completed by a physician or another approved examiner and
submitted to an insurer to supply medical evidence of insurability (or lack of
insurability) or in relation to a claim.
Medical Expenses Reasonable charges for medical, surgical, x-ray, dental,
ambulance, hospital, professional nursing, prosthetic devices, and funeral expenses. (The
insurance company defines what is reasonable.)
Misrepresentation Act of making, issuing, circulating or causing to be issued
or circulated an estimate, an illustration, a circular or a statement of any kind that
does not represent the correct policy terms, dividends or share of surplus or the name or
title for any policy or class of policies that does not in fact reflect its true nature.
Modified Premium Policy (See Graded Premium Policy)
Mortality Charge The charge for the element of pure insurance protection in a
life insurance policy.
Mortality Cost The first factor considered in life insurance premium rates.
Insurers have an idea of the probability that any person will die at any particular age;
this is the information shown on a mortality table.
Mortality Rate The number of deaths in a group of people, usually expressed
as deaths per thousand.
Mortality Table A table showing the incidence of death at specified ages.
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